FPIs stock value soars by $112 bn to $667 bn in H1, says report

Amidst the continuing market rally, the value of the foreign portfolio investors' holdings in the domestic equities jumped by USD 112 billion to USD 667 billion between April 1 and September 30, 2021, even though they have been getting increasingly jittery about the highly stretched valuations, according to an American brokerage report.

The market has been on a song since the second half of 2020 after the pandemic scare shaved off around 23 per cent of the market in March 2020. But since then, the Sensex rallied to touch the 50,000-mark on February 3, 60,000 level on September 25 and 61,000 on October 14. The BSE barometer touched the 62,000-mark on October 19, from under 25,000 points in March 2020.

The value of the FPI holding had stood at USD 555 billion as of March 2021, which was a full USD 105 billion more than between September 2020 and March 2021.

As of June this year, the value of FII investment was only USD 592 billion, which means that as the market rallied frenetically, their holding value jumped by USD 38 billion even though their net incremental investment was almost nil between this period.

In August, FPIs invested the lowest amount since February 2020 by pumping in only USD 281 million.

The valuation of FPI holdings rose to USD 667 billion as of end September, when they pumped in a healthy USD 1.8 billion. This flow took the overall inflows till September this year to USD 8.8 billion, which is the highest among all the emerging market peers so far in 2021, according to Bank of America Securities India report on Wednesday.

Others markets continued to see massive outflows in September, with South Korea losing USD 25.5 billion and Taiwan shedding USD 16.7 billion. Only Brazil has positive inflows at USD 8.1 billion as of September, said the report.

The authors of the report have warned of a tactical correction in the market as the valuations are very stretched.

"With stretched valuations we expect a tactical correction in the market, even though earnings are likely to recover in Q2 as the economy opens," the report said.